Modern trade theory moves away from restrictive assumptions of Herschel Ohlin and Ricardo model and examines the effect on trade of factors like technology and scale of economies. Many researchers have done econometric analysis on the topic and have found that more technologically advanced countries tend to export hi tech products and import labor intensive products. Indicators used to measure the level of technology were aggregate expenditure on research, patents filed and availability of skilled labor. Another major result of their analysis was a positive correlation between size of the economy share in its exports of goods that involve scale of economies.
Internationally traded goods are often divided in three categories. First are the routine processing goods and natural resources such as coal, bauxite, aluminum etc. For such goods generally developing countries have comparative advantage. Such goods are called Ricardo goods. Second category is of low technology goods like textile, steel etc. These goods are called Hershker-Ohlin Goods. Third category is of hi end technologically advanced goods which require huge investment to be done in form research expenditure.
In subject matter of International Economics following are the major themes which recur quite frequently.
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